Planning to take gold loan? Limit tenure to one year to avoid defaults

Gold loan is the quickest and easiest to avail

Business Standard
Last Updated at September 9, 2019 00:20 IST

Those who take large loans for long tenures are the ones most at risk

As fresh loan disbursements by non-banking financial companies (NBFCs) have slowed down in many segments, they have been lending aggressively against gold in recent months
Gold loan is the quickest and easiest to avail. A customer can get it within half an hour if he has the gold and Know Your Customer (KYC) documents ready
Typically, NBFCs offer higher rates but also longer tenures, and they are more flexible than banks
They are popular as they come with flexible repayment options, which suit salaried class and business persons
A borrower can opt for regular equated monthly instalment (EMI). There is another option where the borrower pays interest portion as EMIs and the principal in full at the time of maturity
Typically, a regular EMI option is best suited for salaried individuals who are capable of paying uniform EMIs. A business person can choose from other options based on his assessment of cash flows
For small loan value, borrowers can opt for bullet repayment, where the principal is paid at the end of the tenure
Defaults on gold loans happen mostly when people borrow for a longer tenure. Use it to meet shorter-term needs

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